ISLAMABAD:
Poverty in Pakistan has risen to an 11-year high of 29 percent, while income inequality has reached its highest level in 27 years, as people’s real incomes and consumption have plummeted over the past seven years, according to an official survey released by Planning Minister Ahsan Iqbal on Friday.
Around 70 million people in Pakistan now live in extreme poverty based on the monthly poverty line of Rs 8,484, a minimum expenditure threshold needed to meet the most basic needs of life.
The preliminary report on poverty estimates for fiscal year 2024-25 showed that there was a 32% increase in poverty since 2018-19, when the country conducted the last poverty survey.
According to the results, in 2019 the poverty rate was 21.9%, which during the first year of Prime Minister Shehbaz Sharif’s government (2024-25) jumped to 28.9%. It is the highest level since 2014, when the poverty rate was recorded at 29.5%.
The situation of income inequality in the society was more alarming as the survey showed that inequality jumped to 32.7, the highest ratio since 1998 when it was recorded at 31.1.
Pakistan now officially has the highest unemployment rate in 21 years (7.1%), the highest poverty rate in 11 years and the highest inequality in 27 years, which are direct results of the poor political decisions of the ruling class.
The Minister of Planning admitted that economic stabilization policies under the IMF program contributed to the increase in poverty, particularly due to the withdrawal of subsidies and exchange rate devaluation that led to a massive increase in inflation. He said natural disasters and low economic growth were other factors behind the rise in poverty.
It was also the first time in the last 13 years that the poverty reduction trend was reversed, reinforcing the worst impacts of government policies on people’s socio-economic lives.
Poverty in rural areas increased disproportionately, from 28.2% to 36.2%. Urban poverty, although at a lower level, also increased from 11% to 17.4%.
Iqbal said poverty in all provinces also increased. In Punjab, poverty rose from 16.5 to 23.3%, a 41% increase in seven years. In Sindh, poverty jumped from 24.5% to 32.6%, an increase of a third in seven years.
In Khyber-Pakhtunkhwa, poverty jumped from 28.7% to 35.3%, an increase of almost a quarter in one year. The situation in Balochistan was the worst, where almost one in two people lives in poverty. The proportion in the province affected by the insurgency increased from 42% to 47%, an increase of 12.4%.
Security challenges disrupt livelihoods, limit access to markets and essential services, and increase household vulnerability, and as a result, poverty has increased in Khyber-Pakhtunkhwa and Balochistan, disproportionately affecting the most vulnerable populations in these provinces, the report said.
Real incomes fall
Details showed that real monthly household income decreased from Rs 35,454 in 2019 to just Rs 31,127 in the last fiscal year, a 12% reduction in seven years instead of showing any increase. As a result, real monthly household expenditure decreased from Rs 31,711 to Rs 29,980, a reduction of 5.4%, according to the survey.
According to the survey, nominal income growth was outpaced by inflation, causing real income to fall.
Despite recent macroeconomic improvement, households experienced prolonged real income compression due to historically high inflation, energy price adjustments, exchange rate depreciation, and higher taxes, especially indirect taxes. These factors increased the cost of essential consumption while eroding purchasing power, the report said.
The path to economic progress was first disrupted in 2018 and then again in 2022, consumption-driven economic growth caused the economy to collapse the following year, Ahsan Iqbal said while explaining the reasons for the sharp rise in poverty.
Cash handouts under the Benazir Income Support Program are not the solution to growing poverty and there is a need to accelerate growth and wealth creation, Iqbal said, while advocating for striking a balance between achieving higher growth and maintaining fiscal stability.
Macroeconomic stabilization measures, such as fiscal consolidation, including higher taxes, adjustments in energy tariffs and the rationalization of non-targeted subsidies, together with the monetary adjustment necessary to restore stability, compressed household disposable income, particularly among vulnerable and lower-middle class groups that are not fully covered by social protection programs.
Provincial inequality
Income inequality also increased across the country. Inequality in Punjab rose from 28.4 to 32, Sindh recorded an increase from 29.7 to 35.9, Khyber Pakhtunkhwa rose from 24.8 to 29.4 and Balochistan, although from a lower base, rose from 21 to 26.5.
The report showed that labor market conditions remained weak. Large Scale Manufacturing remained below pre-COVID levels, limiting the recovery of formal employment.
According to the Planning Ministry, growth has been largely driven by production rather than intensive employment. This jobless or low-quality growth limited income recovery, he added.
Only nine million overseas Pakistanis send remittances worth $40 billion, while the population of $240 million cannot export $40 billion, Ahsan Iqbal said.
To a question on the role of PML-N policies in increasing poverty, the Planning Minister said it took at least three years to reverse the adverse implications of PTI policies, with the hope that the next phase of economic growth will reduce poverty.
He ruled out prematurely exiting the IMF program but said the government still has policy space to stimulate growth in the agriculture and information technology sectors.
Iqbal said the current stabilization and reform process provides a foundation for future poverty reduction, but welfare gains will depend on sustained employment growth, recovery of real incomes and greater social protection coverage.
